Explanation:
The White test procedure consists of the following steps:
The test statistic is then computed as nR² from this auxiliary regression, where n is the sample size and R² is the coefficient of determination from the auxiliary regression. This test statistic follows a chi-square distribution under the null hypothesis of homoskedasticity.
Option D correctly describes this procedure. The key points are:
This comprehensive specification allows the test to detect various forms of heteroskedasticity that might be related to the explanatory variables in nonlinear ways.
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White (1980) proposes a simple test for heteroskedasticity, known as the White test. Which of the following statements correctly describes the procedures of the White test?
A
The White test first estimates the model and compute the residuals. It then regresses the residuals on a constant and all explanatory variables.
B
The White test first estimates the model and compute the residuals. It then regresses the residuals on a constant, all explanatory variables, their squares, and their cross-product.
C
The White test first estimates the model and compute the residuals. It then regresses the squared residuals on a constant and all explanatory variables.
D
The White test first estimates the model and compute the residuals. It then regresses the squared residuals on a constant, all explanatory variables, their squares, and their cross-product.